Feb. 26, 2014

Dick Kelly

Written by

John Pekas

An economic bonanza just out of reach continues to frustrate the Minnehaha County Commission.

In a testy discussion Tuesday, commissioners contrasted the county’s booming economy to the Legislature’s disinterest in letting them tax it.

Equalization Director Kyle Helseth told commissioners Minnehaha County enjoyed a robust $568 million in growth last year. It took the county’s total valuation to $12.753 billion from $12.184 billion.

“It’s almost the best I’ve ever seen in Minnehaha County. We’re almost up to $13 billion,” he said.

However, much of the increase, $102 million, represents a continued climb in the value of the county’s 620,000 acres of agricultural land. That’s a reappraisal, said Helseth, not new growth such as the 1,145 new houses built in the county last year. Reappraisals don’t count toward the growth figure used in the state formula to calculate the county’s property tax increase.

Minnehaha County is credited with $318.5 million of new growth, and based on the formula’s consumer price index adjustment, it gets a 1.4 percent property tax increase. Property tax is by far the counties’ largest revenue source. In accessing growth in this revenue stream, counties are limited to a maximum 3 percent annual increase or the CPI adjustment, whichever is less.

Because Minnehaha County’s property tax rate was at a relatively low level when the Legislature reduced property taxes 30 percent in 2000, the CPI adjustment isn’t enough to fund the needs of the rapidly growing county. Minnehaha County sees itself falling further and further behind in trying to make revenue match expenses.

In the past 10 years, general fund expenses have increased 43 percent. But because of limits imposed in the property tax formula, revenue has gone up only 23 percent in that time.

Burdened by this handicap, not being able to tax all the growth in the county is significant.

Adding insult to injury, Minnehaha County commissioners were enthusiastic supporters of SB111 in the Legislature this year. It would have reversed the property tax formula and given counties a 3 percent annual increase or the CPI adjustment, whichever was greater, capped at 4 percent. The bill was killed in the Senate Appropriations Committee 8-1 last week.

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Commissioner Dick Kelly is irked by what he saw as lackluster support for SB111 from other county officials who make up the South Dakota Association of County Commissioners. While Kelly acknowledged that Bob Wilcox, SDACC executive director, lobbied hard for the bill, rank-and-file SDACC members who might not perceive their own counties are suffering from constrained revenue as Minnehaha County is didn’t get behind the effort, Kelly said.

“If they’re not going to help us in the Legislature, we have to take a long look at what we’re doing with the SDACC,” he said.

While Minnehaha County might be facing its revenue problems and acting on them by holding down expenses and opting out of the property tax limit, Commissioner John Pekas said a judgment day is looming for other counties.

“Do not kid yourself. There are some other counties that are in dire straits that have not yet had the courage to put pencil to paper,” he said. “We had the courage to opt out five times.”

Asking voters to opt out of property tax limits originally was envisioned as a way for counties to pay for extraordinary expenses such as big building projects. However, more counties are having to use the opt-out simply to fund ongoing expenses, Pekas said.

“If the state doesn’t raise taxes, we have to. That’s not fair, but I’m calling it the way I see it,” he said.

He told commissioners: “I believe this is going to be an issue that crops up in the future over and over again. Eventually, our partners in Pierre are going to have to take action.”

Commission chairwoman Cindy Heiberger wants to jump start Pekas’ prediction by inviting legislators from Minnehaha County to attend the commission’s budget hearings this spring. She said legislators will see firsthand the county’s fiscal challenges. As SB111 was failing in the Legislature, Heiberger said, “we didn’t even get much support from our local people.